The ordering cost is 100 and inventory carrying cost is 51 cents per pound per year D 3400 S 100 H051 a The supplier has just announced that orders of 1000 pounds and more will be filled at a price of 2 per pound Determine the order size that will minimizes the total cost ID: 370602
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Slide1
A small manufacturing firm uses approximately 3400 pounds of chemical dye per year. Currently the firm purchases 300 pounds per order and pays $3 per pound. The ordering cost is $100 and inventory carrying cost is 51 cents per pound per year. D= 3400, S= 100, H=0.51a) The supplier has just announced that orders of 1000 pounds and more will be filled at a price of $2 per pound. Determine the order size that will minimizes the total cost.b) If the supplier offered a discount at 1500 pounds instead of 1000 pounds, what order size will minimize total cost?
Assignment Ch12(b) Slide2
The Total-Cost Curve is U-Shaped
Ordering Costs
Q
O
Order Quantity (Q)
Annual Cost
(
optimal order quantity)
Ordering and Carrying CostsSlide3
CostEOQ
TC with PD
TC without PD
PD
0
Quantity
Adding Purchasing cost
doesn’t change EOQ
Ordering, Carrying, and Purchasing CostsSlide4
Cost
0
Quantity
Price Discount
p
1
p
2Slide5
Cost
EOQ
0
Quantity
Total Cost Including Purchasing Cost
p
1
p
2Slide6
Cost
EOQ
0
Quantity
Price Breaks: EOQ Preferred Slide7
Cost
Q
0
Quantity
Price Breaks: Discount Point Preferred Slide8
Cost
EOQ
0
Quantity
Price Breaks: EOQ Preferred Slide9
A small manufacturing firm uses approximately 3400 pounds of chemical dye per year. Currently the firm purchases 300 pounds per order and pays $3 per pound. The ordering cost is $100 and inventory carrying cost is 51 cents per unit per year. D=3400, S= 100, H=.51a) The supplier has just announced that orders of 1000 pounds and more will be filled at a price of $2 per pound.
The Problem: Part A
Q P
0-999 3
≥
1000 2
DONESlide10
A small manufacturing firm uses approximately 3400 pounds of chemical dye per year. Currently the firm purchases 300 pounds per order and pays $3 per pound. The ordering cost is $100 and inventory carrying cost is 51 cents per unit per year. D=3400, S= 100, H=.51b) Determine the order size that will minimizes the total cost.If the supplier offered a discount at 1500 pounds instead of 1000 pounds, what order size will minimize total cost?
Q P
0-... 3
≥
1500
2
The Problem: Part BSlide11
b) If the supplier offered a discount at 1500 pounds instead of 1000 pounds, what order size will minimize total cost?Q P0-... 3≥1500 2
D= 3400, S=100, H= .51
TC = H
Q
/2 + SD/
Q
+
P
D
TC ( Q = 1155 , P = 3) = 0.51(
1155)/2 + 100(3400)/1155 +
3(3400)TC = 294.5 + 294.5 + 10200 = 10789TC ( Q = 1500 , P = 2) = 0.51(1500)/2 + 100(3400)/1500 + 2(3400)TC = 382.5+226.7 +6800 = 7409.2
The Problem: Part B